Goldman Sachs Strategists Predict U.S. Equities Rally in the Next Four Weeks
In a recent note to clients, Goldman Sachs strategists have forecasted a potential rally in U.S. equities over the next four weeks. They point to positive technical equity dynamics and a tailwind from corporate buybacks as key drivers for this bullish outlook.
According to the strategists, trend-following rule-based systematic funds have shifted from being $450 billion long in July to $250 billion long currently, signaling a re-leveraging process. Additionally, there is potential for a 'green sweep' for commodity trading advisers (CTAs), which could lead to significant buying activity in the stock market irrespective of market direction.
The analysis suggests that in a stable or rising market, approximately $27 billion could flow into U.S. stocks, while even a declining market could still see around $22.9 billion in inflows. Furthermore, the unwinding of put positions by target volatility and volatility control funds has been observed, with the VIX index experiencing its largest 9-day volatility drop in history.
Traders are also positioned long gamma again, further supported by corporate demand with an estimated $6.62 billion in daily purchasing power until the corporate blackout period ends on September 13. However, caution is advised for the period after September 16, as historically, the second half of September has been the worst two-week trading period of the year.
Looking ahead, strategists remain optimistic for the market, projecting a potential rise to 6,000 with November and December being key months for growth. JPMorgan Chase & Co. also expressed confidence in a continued rally for U.S. stocks through the end of the year, citing recent economic data and earnings reports as reinforcing a bullish perspective.
While potential risks exist, such as Japan's inflation data, geopolitical events affecting oil prices, the upcoming U.S. election, changes in the Federal Reserve's commentary, and weak seasonality, both Goldman Sachs and JPMorgan remain bullish on the outlook for U.S. equities.
In summary, the forecast suggests a positive outlook for U.S. stocks in the coming weeks, with potential for significant buying activity and market growth. Investors should consider these factors when making decisions about their portfolios and be mindful of the risks involved in the current market environment.